State Growth Management and Housing Prices*

Abstract

Objective. In the United States, growth regulations aimed at environmental protection and better‐quality urban areas have become very popular since the 1960s. Although many studies have examined the housing‐price effects of local and regional growth management regulations, none has examined the effects of a state law. Past research has also tended to be cross‐sectional, rather than longitudinal, and has frequently ignored alternate hypotheses that could explain housing‐price trends. The research presented in this article examines the housing‐price effects of Florida's Growth Management Act of 1985.Methods. Using secondary source data from all 67 counties of the state for the period 1980–1995 and employing pooled time‐series analysis techniques I test the hypothesis that the Act had an inflationary effect on single‐family house prices.Results. After controlling for alternate hypotheses such as population, income, and size of house, I find a statistically significant increase in the price of single‐family houses attributable to statewide growth management. Also, the demand‐side and supply‐side price inflationary effects of growth management are similar in magnitude.Conclusions. Since higher housing prices could become the Achilles heel of growth management programs and thwart their implementation, I suggest a few ways some of the price inflationary effects may be reduced.